Commodities: Crude ahead towards end-Q2 as traders reckon sell-off over-done

Crude oil futures are rising towards the end of the second quarter, with more than a few traders reckoning the black liquid's sell-off might have been over-done.

"The energy market been on the rise since the 21st of June," said David Madden at CMC Markets UK.

"There is a sense the severe sell-off oil endured from late May to the middle of June was over-done, and now a mixture of short covering and bargain hunting is driving the price higher."

He noted that the fundamentals of the oil market remain weak as demand from Asia was falling and production from some Opec members -- notably Libya and Nigeria, which were exempted from the cartel's output pledge -- is rising.

There was also murmurings -- very speculative and perhaps wishful -- that Opec may yet look to deepen its production curbs.

At 15:14 BST, Nymex-priced West Texas Intermediate crude was up 0.8% to $45.10 a barrel, with Intercontinental Exchange-traded Brent up 0.74% to $47.66 a barrel.

Crude is in the midst of a long-running global glut. Opec's recently extended output curbs have been seen as insufficient in the face of rising US shale output. Soaring output from Libya and Nigeria was also a worry.

"This threatens to close the window of time for stocks to normalise before Opec cuts end and raises the concerns that Opec will then ramp up production to defend market share," said Goldman Sachs analysts in a note quoted by The Economic Times.

"The approach adopted so far by Opec, akin to a central bank, has ultimately proved self-defeating by cutting too little but reassuring too much," the Goldman analysts wrote.

Turning to metals, on Comex, gold fell 0.48% to $1243.10 an ounce. Silver fell 0.72% to $16.67 an ounce. Copper was 1.27% ahead at 271.00 cents a pound.

"Gold grinded lower as the final reading of US first-quarter growth domestic product came in at 1.4%, while traders were expecting a reading of 1.2%," said Madden.

"The metal has been falling since early June and seeing as the growth rate in the US was higher than initially thought, we could see this trend continue."

The US Federal Reserve was keen to keep tightening its monetary policy, and today’s report would suggest the US economy was gaining momentum.

"Some traders are sceptical that the Fed aren’t as hawkish as they are letting on, and Janet Yellen, the Fed chief, doesn’t want to rush into further interest rate hikes," said Madden.

On London Metals Exchange, three-month industrial metals were mostly ahead. Tin rose 0.86%, aluminum rose 0.69% and copper added 0.39%. Zinc fell 0.47%.